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Can You Transfer a Car Loan to Someone Else

Can You Transfer a Car Loan to Someone Else

If you’re struggling to make your monthly payments, you may be wondering if you can transfer your auto loan to another person.

The short answer is that it depends on the lender and loan type. While not always straightforward, transferring a car loan is possible in certain cases.

Read below to see your options…

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Key Things to Understand About Transferring an Auto Loan

The majority of mainstream lenders do not allow directly transferring a loan from one person to another. So you typically can’t just assign your contract to someone else to take over your exact same payments and terms.

However, some auto loans have an “assumption” clause that permits transferring the loan to a new owner under specific conditions.

So, first, you’ll want to double-check if your loan contract allows assumptions.

Even then, the new person must be approved by the lender and often needs good credit, stable income, and enough cash to qualify.

Essentially, they’ll apply for a new loan using your car as collateral. Once approved, their loan pays off your balance.

So, while not always seamless, with the right loan type and borrower, transferring a car loan can remove the financial liability from you. The new owner becomes responsible for the vehicle and loan payments moving forward.

Top Reasons for Transferring an Auto Loan

There are a few common scenarios where transferring a car loan starts to make sense:

  • You can no longer afford the payments due to job loss, medical bills, etc.
  • You moved somewhere like a big city with less need for a personal vehicle.
  • You want to gift the car to a family member and have them take over car payments.
  • The vehicle no longer meets your needs (e.g. growing family needing more space).
  • You wish to buy a cheaper, more affordable car.

Essentially if your situation changed where keeping the car loan no longer fits your life, finding someone to take it over can provide welcome financial relief.

Step-by-Step Process to Transfer an Auto Loan

If your lender permits assumptions, here is an overview of what’s entailed in transferring your car loan:

Step 1: Review Loan Terms and Contact Lender

  • Carefully read your loan contract to confirm assumption is allowed
  • Contact lender to discuss transfer and learn their specific requirements

Step 2: Identify a New Borrower

  • Choose someone creditworthy that meets lender’s criteria
  • Have them prepare needed documents for application

Step 3: File Paperwork and Get Approval

  • New borrower completes loan application and is approved
  • Sign updated paperwork and loan contract

Step 4: Update Title, Registration & Insurance

  • Change title to reflect new owner
  • Update vehicle registration
  • Modify insurance to new owner

So, in summary, if permitted by your lender, transferring an auto loan to another person boils down to finding a qualified borrower to take over your loan contract. With some coordination, it can effectively release you from the monthly payments.

Key Things to Consider Before Attempting a Car Loan Transfer

While it can provide financial relief, there are some important considerations around trying to transfer your auto loan:

  • Not all lenders allow assumptions, so check your loan terms
  • The new owner’s credit score impacts the likelihood of approval
  • Transferring the loan may incur fees from the lender
  • You may owe early repayment penalties or interest
  • It can temporarily hurt your credit score
  • Insurance changes are required

So, weigh the pros and cons vs. alternatives like selling the vehicle before deciding if a loan transfer makes the most financial sense. And remember to involve your lender early and follow their required steps.

Alternatives if Your Lender Doesn’t Allow Transfers

If your auto loan doesn’t allow assumptions, or you run into issues finding an approved borrower, here are a couple alternatives to consider:

Refinance the Loan

You may be able to lower your payments by working with your existing lender or another company to refinance your car loan. This gets you a new loan contract with hopefully better rates and terms.

Sell the Vehicle

Selling the vehicle yourself and using the proceeds to pay off the old loan is the most direct way to get out from under the debt obligation. Just be mindful of any early repayment penalties.

My Final Thoughts

So, in closing, transferring a car loan to another person is situationally possible depending on your loan terms and lender policies.

But even if a direct transfer isn’t feasible, solutions like refinancing or selling the vehicle can still help relieve you of the financial burden.

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Picture of Steve Momot - Author

Steve Momot - Author

Steve, a seasoned expert in the automotive industry, formerly held a car dealer license in Florida. With extensive experience spanning across car trading and mechanical work, he founded Autohitch. His mission? To guide both buyers and sellers through the intricate maze of car purchasing, ensuring a seamless and informed experience. Outside of the automotive world, Steve has a passion for fishing and capturing the beauty of nature through photography.


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